Business & Markets

Local banks worried over treasury single account

Local banks in the country have said they are unable to comply with a directive by government to transfer monies held by government entities with local banks to the central bank under the Treasury Single Account initiative as demanded by the Public Financial Management Account (Act 921).

According to the PFMA which establishes the Treasury Single Account, the initiative is to, among other things, serve as an account into which all government cash including monies received by covered entities shall be deposited and from which all expenditure of government and entities shall be made.
But the banks explain that the government entities that have funds lodged with them have borrowed against these funds and as such transferring these balances and any action requiring the transfer of these accounts without settling the indebtedness will severely jeopardise the banks.

“The transfer of the accounts without the settlement by the government of the overdue credit to government institutions and related government projects will create significant balance sheet mismatches and negatively impact on the financial sector in particular and the economy as a whole.

Moreover, the banks have said a significant portion of funds they are being requested to transfer to the central bank have been advanced as credit mostly to other government institutions and related government projects with overdue repayments.
Given government’s indebtedness to commercial banks among other concerns, the banks are placed in a position which constrains us to meet the request to transfer Government of Ghana account balances to the central bank,” the banks said in a statement cited by the B&FT.

The banks further stated that they are saddled with the effects of delayed payments related to government projects and these delays are relatively compensated for by banks’ engagement in managing government revenue business.

“The banks have invested in, and deployed robust infrastructure and branch networks throughout the country which are assisting governmental institutions in accessing their revenues in areas which would otherwise have been challenging.
The cost-benefit analysis of the investment decisions took into consideration, the holding period of government related deposits among others. Any action therefore, that denies the banks the benefit of deposits from such investments would have a negative impact on banks’ operations,” the banks cried.

The banks while agreeing the need to for government to consolidate its accounts argued that government should rather look at exploring other means of unifying the accounts which will allow government have a consolidated view of cash resources.
Currently, commercial banks transmit balances of all government accounts on a daily basis to a designated SWIFT address. This, they said, allows the government to view all its balances via a single window.

“Commercial banks are in a position to partner with Government to offer IT solutions which would guarantee real time access to named government officials responsible for managing government revenue,” the banks argued.

The banks believe that this would go a long way to assist the government manage its financial resources in an efficient manner for the mutual benefit of commercial banks and government.
The banks urged that government should continue to engage commercial banks in the TSA implementation to reduce the impact on commercial banks’ liquidity.

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